Certified Government Financial Manager (CGFM) Practice Exam 2025 - Free CGFM Practice Questions and Study Guide

Question: 1 / 875

According to the laws prohibiting borrowing, what is allowed?

Borrowing for future needs

Only borrowing to meet cash flow needs

The correct answer highlights that borrowing is permissible specifically to meet immediate cash flow needs. This aligns with laws that aim to ensure responsible fiscal management and prevent excessive debt accumulation. Governments often face fluctuations in revenue, and borrowing to cover these shortfalls ensures they can continue to operate effectively without jeopardizing financial stability.

In contrast, borrowing for future needs or operational flexibility may not be allowed under these laws, as it implies a reliance on debt for long-term financial planning, which could lead to unsustainable fiscal practices. Therefore, the focus on meeting current cash flow requirements ensures that the borrowing remains a tool for maintaining immediate operational integrity without fostering a pattern of irresponsible debt accumulation.

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Borrowing for operational flexibility

None of the above

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